Does Africa need industrial policy?

My good friend and predecessor John Page gave a provocative seminar with the title of this post the other day. His main point, echoed in this year’s UNIDO Industrialization Report, was that Africa’s industrial sector was declining, and some type of collective action (he called it “policies for industrialization” rather than the maligned phrase “industrial policy”) is needed so that the continent could resume industrial growth.

As the discussant, I suggested that Africa’s poor industrial performance, like that of South Asia, was itself the result of poor policies of the past. What was the guarantee that this new generation of policies would work any better? John countered by drawing on the East Asian experience, where many policies were tried, but their effects were closely monitored and, when they were not working, mid-course corrections were implemented. But for this to work in Africa, we need monitoring indicators that tell us that these industrial policies are working, or are not working, so that the corrections can be made in a timely fashion. Perhaps that is the main potential use of the Doing Business Indicators, something which John and others have criticized for their weak relationship with the main determinants of industrial performance, but which can serve as a real-time indicator of progress in implementing industrial policies and hence a guide to whether mid-course corrections are needed or not.

Comments

Living and working in Africa, I tend to agree that Africa does need policies of industrialization rather than industrial policies (after all when you come to think of it grammatically, how can policies be industrial?). However with the weak implemenation and monitoring framework characterising most African countries a clear challenge would be how to make these policies work. A good starting point is the quality of statistics from all the sectors of their economies...the old cliche goes..."you cant manage what you cant measure"

Dear Shanta Devarajan,
I share some of your concerns regarding industrial policy in Africa and agree that a very important aspect is the intelligent monitoring of support measures etc. But, I doubt that this can be done with the Doing Business Indicators. This is a rather narrow set of indicators for the regulatory business environment. How can these "serve as a real-time indicator of progress in implementing industrial policies"? I assume one might argue that the quality of business regulation and the degree of coherent implementation can be a sort of a proxy for public sector capacity. So one might argue that an improvement in regulation and implementation does signal an overall improvement in public sector capacity, thus enhanced chances to implement complex industrial policy measures sophisticatedly. However, that is a bit far fetched, isn't it?
Actually, I have done research on the DBI and would even argue that they tell us very little with respect to public sector capacity. Less regulation is not always better, and therefore not always a sign of a more competent public sector.
From my point of view the previous commentator, Temwa Gondwe, raised an important issue: "you cant manage what you cant measure". I just presented a paper with some thoughts on policy space at the European Conference on African Studies (http://www.uni-leipzig.de/~ecas2009/). I argue that despite international regulation factors on the domestic level are important to consider when talking about limitation of policy space. My understanding of policy space is that it is a mix of the actual room for manoeuvre as defined by laws and a government's own capacity and knowledge on the respective policy field. One of my arguments is that policy space of many governments in Africa is limited exactly because of insufficient information about economic activities. E.g. a large share of the economic activity is in the informal/unregulated sphere. If a government supports a specific sector it is arguably quite difficult to monitor its development with regard to productivity and competitiveness if the government is lacking comprehensive information on production, employment etc. due to the naturally lacking information on informal production.
Best, Chris

Very important post. The debate about industrial policy is certainly necessary for the development community to have. I wrote a very brief article on my blog raising some of the same questions. http://www.athompsonmonitor.com/2009/06/african-development-requires-active.html
Thanks for posting,

The weak industrial performance has deeper roots. In my opinion it is not enough only a strong industrial policy, but also a strong social policy.
It is necessary that governments create the conditions for society to develop, increasing levels of education and professionalism.
With a more prepared society we create conditions for a strong industrial policy, because this is the natural way.
Sustainable and strong industrialization only exist when there are professionalism and education, only when there is a good base.
Great post!

...it is also important to discuss the priorities for investments in education if your funds are limited. Due to MDG 2 we have seen important progress with primary schooling. To be literate and numerate opens a new world to us. But these are most often just the basis skills you need to find (formal) work. So secondary education, vocational education and training, tertiary education are very important if a government implements industrial policies. And then we are again confronted with the problem of picking winners. Shall(or to what extent shall) a government align the education system with its industrial policy?

The current global business scenario industrialisation challenge is to grow and diversify manufacturing exports and tradable services by Outsourcing and Offshoring and having industrial policies in place

...it is also important to discuss the priorities for investments in education if your funds are limited. Due to MDG 2 we have seen important progress with primary schooling. To be literate and numerate opens a new world to us. But these are most often just the basis skills you need to find (formal) work. So secondary education, vocational education and training, tertiary education are very important if a government implements industrial policies. And then we are again confronted with the problem of picking winners. Shall(or to what extent shall) a government align the education system with its industrial policy?

I argue yes, Africa needs an Industrial policy of its own orgin and characteristic not externally imposed one. Everybody knows that no country in the world developed without industrial policy.So Africa also needs an industrial policy which integrates the African national states endigeneous institutions , and works for the welfare of the poor in Africa.
Let's see light at the end of the Tunnel.Let's work for African growth and then development. Africa can clam 21st century. It is time to think African development by Africans and geninune partners in the other continents.
Regards,
MF Zerihun(Ehthiopian)
PhD Research Fellow
UP, RSA